HALLIBURTON COMPANY Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) should be read in conjunction with the condensed consolidated financial statements included in "Item 1. Financial Statements" contained herein.
EXECUTIVE OVERVIEW Organization We are one of the world's largest providers of products and services to the energy industry. We help our customers maximize value throughout the lifecycle of the reservoir - from locating hydrocarbons and managing geological data, to drilling and formation evaluation, well construction and completion, and optimizing production throughout the life of the asset. Activity levels within our operations are significantly impacted by spending on upstream exploration, development, and production programs by major, national, and independent oil and natural gas companies. We report our results under two segments, the Completion and Production segment and the Drilling and Evaluation segment: •our Completion and Production segment delivers cementing, stimulation, intervention, pressure control, artificial lift, and completion products and services. The segment consists of Production Enhancement, Cementing, Completion Tools, Production Solutions, Artificial Lift, and Pipeline and Process Services. •our Drilling and Evaluation segment provides field and reservoir modeling, drilling, fluids and specialty chemicals, evaluation and precise wellbore placement solutions that enable customers to model, measure, drill, and optimize their well construction activities. The segment consists of Baroid,Sperry Drilling , Wireline and Perforating, Drill Bits and Services,Landmark Software and Services, Testing andSubsea , and Project Management. The business operations of our segments are organized around four primary geographic regions:North America ,Latin America ,Europe /Africa /CIS, andMiddle East /Asia . We have manufacturing operations in various locations, the most significant of which are inthe United States ,Malaysia ,Singapore , and theUnited Kingdom . With approximately 40,000 employees, we operate in more than 70 countries around the world, and our corporate headquarters is inHouston, Texas . Our value proposition is to collaborate and engineer solutions to maximize asset value for our customers. We work to achieve strong cash flows and returns for our shareholders by delivering technology and services that improve efficiency, increase recovery, and maximize production for our customers. Our strategic priorities are to: -deliver profitable growth in our international business; -maximize cash flows in ourNorth America business; -accelerate the deployment and integration of our digital technologies, both internally and with our customers; -improve capital efficiency by advancing our technologies and making strategic choices that lower our capital expenditure profile; and -actively participate in advancing a sustainable energy future.
The following charts depict revenue split between our two operating segments and
our four primary geographic regions for the quarter ended
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Table of Contents Part I. Item 2 | Executive Overview
Market conditions update and COVID-19 pandemic
The oil and gas industry continued to be impacted from shutdowns as a result of
the COVID-19 pandemic, specifically in Asia . In spite of COVID-19 interruptions
from mobility restrictions and daily precautions continuing to remain in place,
business activity around the world has adjusted and continues to improve. West
Texas Intermediate (WTI) oil prices have recovered to pre-pandemic levels,
averaging approximately $71 per barrel during the third quarter of 2021. The
U.S. land average rig count continues to be well below pre-pandemic levels, but
it did rise 11% in the third quarter of 2021 compared to the second quarter of
2021. The Brent crude oil price averaged over $73 per barrel during the third
quarter of 2021 and the international average rig count increased 5% as compared
to the second quarter of 2021. With the current shortage of other sources of
energy, and the economic growth associated with what appears to be a global
emergence from the pandemic, the demand for and price of oil has improved. We
believe that global oil demand will continue increasing in the fourth quarter of
2021 and into 2022.
Financial results The following graph illustrates our revenue and operating margins for each operating segment for the third quarter of 2020 and 2021.
[[Image Removed: hal-20210930_g3.jpg]]
During the third quarter of 2021, we generated total company revenue of $3.9
billion , a 30% increase as compared to the third quarter of 2020. We reported
operating income of $446 million during the third quarter of 2021 that included
$12 million of special items. This compares to operating income of $142 million
during the third quarter of 2020 which was impacted by $133 million of severance
and other charges. Our Completion and Production segment revenue increased 36%
in the third quarter of 2021 as compared to the third quarter of 2020, primarily
due to increased pressure pumping services in North America land. Our Drilling
and Evaluation segment revenue increased 23% in the third quarter of 2021 as
compared to the third quarter of 2020, driven primarily by improvements in
drilling-related services activity in the Western Hemisphere. Operating margins
in both of our operating segments improved in the third quarter of 2021 as
compared to the third quarter of 2020 on higher commodity prices driving
increased activity, higher utilization, and better operating leverage from our
structural cost reductions implemented during 2020.
In North America , our revenue increased 64% in the third quarter of 2021, as
compared to the third quarter of 2020, driven by increased pressure pumping
services in North America land, as well as increased activity in most other
product service lines. Both of our segments' revenue increased over 50% in the
third quarter of 2021 compared to the third quarter of 2020, while the average
North America rig count more than doubled for the same period. Although the
North America rig count is increasing, it is still below pre-pandemic levels.
Revenue in our international markets increased 13% in the third quarter of 2021,
as compared to the third quarter of 2020, primarily driven by improvements in
most product service lines in Latin America , particularly Argentina ,
drilling-related services, project management activity, and pipeline services in
Middle East /Asia , and cementing and well intervention in Europe /Africa /CIS,
partially offset by lower completion tool sales in the Eastern Hemisphere.
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Table of Contents Part I. Item 2 | Executive Overview
Sustainability and Energy Advancement
We continue to pursue our strategic initiatives around advancing cleaner,
affordable energy, and supporting sustainable energy advancements, using
innovation and technology to reduce the environmental impact of producing oil
and gas. As such, we are continuing to develop and deploy low-carbon solutions
to help oil and gas operators lower their current emissions profiles while also
using our existing technologies in renewable energy applications. In addition,
Halliburton Labs , our energy transition accelerator, announced its inaugural
group of participating companies in the first quarter of 2021 and announced four
additional participating companies in the third quarter of 2021, doubling the
number of participating companies to eight.
Our operating performance and liquidity are described in more detail in "Liquidity and Capital Resources" and "Business Environment and Results of Operations."
HAL Q3 2021 FORM 10-Q | 15
--------------------------------------------------------------------------------Table of Contents Part I. Item 2 | Liquidity and Capital Resources
LIQUIDITY AND CAPITAL RESOURCES
As of both
Significant sources and uses of cash during the first nine months of 2021 Sources of cash: •Cash flows from operating activities were$1.2 billion . This included a positive impact from the primary components of our working capital (receivables, inventories, and accounts payable) of a net$81 million . Uses of cash: •In February of 2021, we repaid the$185 million principal balance of our 8.75% senior debentures at maturity. •In August of 2021, we redeemed the entire$500 million aggregate principal amount outstanding of our 3.25% senior notes at par. •Capital expenditures were$483 million , a decrease of 5% from the first nine months of 2020, as we adjusted to market conditions. •We paid$121 million in dividends to our shareholders. Future sources and uses of cash We manufacture most of our own equipment, which allows flexibility to increase or decrease our capital expenditures based on market conditions. We expect capital spending for the full year 2021 will be approximately 5-6% of revenue. We believe this level of spend will allow us to invest in accordance with our key strategic priorities, while continuing to rationalize our business to market conditions. We intend to continue to maintain capital discipline, monitor the rapidly changing market dynamics, and adjust capital spending accordingly. Our quarterly dividend rate is$0.045 per common share, or approximately$40 million . We will continue to maintain our focus on liquidity and review our quarterly dividend considering our priorities of debt reduction and, as market conditions evolve, reinvesting in our business. Our Board of Directors has authorized a program to repurchase our common stock from time to time. No repurchases occurred during the third quarter of 2021 under this program. Approximately$5.1 billion remained authorized for repurchases as ofSeptember 30, 2021 and may be used for open market and other share purchases. Other factors affecting liquidity Financial position in current market. As ofSeptember 30, 2021 , we had$2.6 billion of cash and equivalents and$3.5 billion of available committed bank credit under our revolving credit facility. We believe we have a manageable debt maturity profile, with approximately$1.6 billion coming due through 2026. Furthermore, we have no financial covenants or material adverse change provisions in our bank agreements, and our debt maturities extend over a long period of time. We believe our cash on hand, cash flows generated from operations, and our available credit facility will provide sufficient liquidity to address the challenges and opportunities of the current market and our global cash needs, including capital expenditures, working capital investments, dividends, if any, and contingent liabilities. Guarantee agreements. In the normal course of business, we have agreements with financial institutions under which approximately$1.9 billion of letters of credit, bank guarantees, or surety bonds were outstanding as ofSeptember 30, 2021 . Some of the outstanding letters of credit have triggering events that would entitle a bank to require cash collateralization, however, none of these triggering events have occurred. Credit ratings. Our credit ratings withStandard & Poor's (S&P) remain BBB+ for our long-term debt and A-2 for our short-term debt, with a negative outlook. Our credit ratings with Moody's Investors Service (Moody's) remain Baa1 for our long-term debt and P-2 for our short-term debt, with a stable outlook. Customer receivables. In line with industry practice, we bill our customers for our services in arrears and are, therefore, subject to risk that our customers may delay or fail to pay our invoices. In weak economic environments, we may experience increased delays and failures to pay our invoices due to, among other reasons, a reduction in our customers' cash flow from operations and their access to the credit markets, as well as unsettled political conditions. Given the nature and significance of the pandemic and disruption in the oil and gas industry, we have experienced delayed customer payments and payment defaults associated with customer liquidity issues and bankruptcies. HAL Q3 2021 FORM 10-Q | 16 --------------------------------------------------------------------------------
Table of Contents Part I. Item 2 | Liquidity and Capital Resources Receivables from our primary customer inMexico accounted for approximately 10% of our total receivables as ofSeptember 30, 2021 . While we have experienced payment delays inMexico , these amounts are not in dispute and we have not historically had, and we do not expect, any material write-offs due to collectability of receivables from this customer. HAL Q3 2021 FORM 10-Q | 17 -------------------------------------------------------------------------------- Part I. Item 2 |
Business Environment and Results of
Table of Contents Operations
BUSINESS ENVIRONMENT AND RESULTS OF OPERATIONS
We operate in more than 70 countries throughout the world to provide a comprehensive range of services and products to the energy industry. Our revenue is generated from the sale of services and products to major, national, and independent oil and natural gas companies worldwide. The industry we serve is highly competitive with many substantial competitors in each segment of our business. During the first nine months of 2021, based upon the location of the services provided and products sold, 40% of our consolidated revenue was fromthe United States , compared to 38% of consolidated revenue fromthe United States in the first nine months of 2020. No other country accounted for more than 10% of our revenue. Operations in some countries may be adversely affected by unsettled political conditions, acts of terrorism, civil unrest, force majeure, war or other armed conflict, sanctions, expropriation or other governmental actions, inflation, changes in foreign currency exchange rates, foreign currency exchange restrictions and highly inflationary currencies, as well as other geopolitical factors. We believe the geographic diversification of our business activities reduces the risk that an interruption of operations in any one country, other thanthe United States , would be materially adverse to our consolidated results of operations. Activity within our business segments is significantly impacted by spending on upstream exploration, development, and production programs by our customers. Also impacting our activity is the status of the global economy, which impacts oil and natural gas consumption. The COVID-19 pandemic and efforts to mitigate its effect had a substantial negative impact on the global economy and demand for oil. As discussed earlier, although there are signs of improvement in many areas around the world, the potential for new lockdowns and other mitigation efforts to deal with an increase in infection rates in certain areas remains a key risk for oil demand. Some of the more significant determinants of current and future spending levels of our customers are oil and natural gas prices and our customers' expectations about future prices, global oil supply and demand, completions intensity, the world economy, the availability of capital, government regulation, and global stability, which together drive worldwide drilling and completions activity. Additionally, many of our customers inNorth America have shifted their strategy from production growth to operating within cash flow and generating returns. Lower oil and natural gas prices usually translate into lower exploration and production budgets and lower rig count, while the opposite is usually true for higher oil and natural gas prices. Our financial performance is therefore significantly affected by oil and natural gas prices and worldwide rig activity, which are summarized in the tables below. Traditionally, theNorth America market recovers from downturns in the industry quicker than the international markets. We have started to see this play out as rig counts have recovered faster in 2021 inNorth America than internationally. We would expect to continue to see this dynamic in 2022.
The table below shows the average oil and natural gas prices for WTI, United
Kingdom Brent crude oil, and
Three Months Ended Year Ended
September 30 December 31
2021 2020 2020
Oil price - WTI (1) $ 70.62 $ 40.89 $ 39.23
Oil price - Brent (1) 73.47 42.96 41.76
Natural gas price - Henry Hub (2) 4.36 2.00 2.04
(1) Oil price measured in dollars per barrel. (2) Natural gas price measured in dollars per million British thermal units (Btu), or MMBtu.
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Part I. Item 2 | Business Environment and Results of
Table of Contents Operations
The historical average rig counts based on the weekly
Three Months Ended Nine Months Ended Year Ended
September 30 September 30 December 31
2021 2020 2021 2020 2020
U.S. Land 485 242 435 460 418
U.S. Offshore 11 12 15 16 15
Canada 151 47 122 90 89
North America 647 301 572 566 522
International 772 731 735 880 825
Worldwide total 1,419 1,032 1,307 1,446 1,347
Business outlook
In the United States Energy Information Administration (EIA) October 2021 "Short
Term Energy Outlook," the EIA projects WTI prices to average $78 per barrel in
the fourth quarter of 2021, and $68 per barrel for the full year 2021 and 2022.
The EIA's report projects Brent oil prices to average $81 per barrel in the
fourth quarter of 2021, with a full year 2021 average of $71 per barrel, a rise
of approximately $29 per barrel as compared to the full year 2020. The EIA's
full year projection for 2022 is that Brent oil prices will average $72 per
barrel.
The Henry Hub natural gas price averaged $4.36 per MMBtu in the third quarter of
2021 as compared to $2.00 per MMBtu in the third quarter of 2020, an increase of
$2.36 per MMBtu. The EIA October 2021 "Short Term Energy Outlook" projects Henry
Hub natural gas prices to average $4.17 per MMBtu for the full year 2021, and
$4.01 per MMBtu in 2022.
The International Energy Agency's (IEA) October 2021 "Oil Market Report"
forecasts global oil demand to reach 96.1 million barrels per day in 2021, an
increase of 5.2 million barrels per day from 2020 and to rise by an additional
3.2 million barrels in 2022. The EIA projects crude oil production in the United
States will average 11.0 million barrels per day in 2021, approximately a 3%
decrease from 2020, and to average 11.7 million barrels per day in 2022, a 6%
increase from 2021, as tight oil production rises in the United States . The EIA
anticipates that production will grow in 2022 as a result of operators
increasing rig counts, which are expected to more than offset production decline
rates.
In spite of COVID-19 interruptions from mobility restrictions and daily
precautions continuing to remain in place, business activity around the world
has adjusted and continues to improve. We expect the balancing of global supply
and demand to continue to tighten, resulting in a strong commodity price
environment. In the international markets, activity increases continued in the
third quarter of 2021 and we believe activity will accelerate into year-end. In
North America , the bifurcation between publicly traded and private exploration
and production (E&Ps) company activity continued in the third quarter of 2021.
Publicly traded E&Ps generally remain committed to their spending plans for
2021, while private E&Ps, which operate about 60% of the U.S. land rig count,
are generally increasing activity in an effort to continue to take advantage of
a stronger commodity price environment. Drilled but uncompleted well counts
(DUCs) in North America reached the lowest level since 2013, as operators
depleted the surplus of DUCs accumulated in 2020. Next year we expect North
America E&Ps to drill and complete more new wells to offset steep base decline
rates and deliver production into the market. In North America , we expect
moderate pricing and activity improvements in drilling and completions to drive
further growth in the fourth quarter of 2021.
In 2022, we expect international activity momentum to accelerate and
international pricing to move higher in certain geographies as a result of
higher activity. While large tenders remain competitive, we are already seeing
modest price increases on discrete work in underserved markets. In North
America , we expect E&P spending to increase, including net pricing gains for not
only our low-emissions equipment but also the rest of our fracturing fleet and
for our drilling, cementing, drill bits, and artificial lift businesses.
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Part I. Item 2 | Results of Operations in 2021 Compared to
Table of Contents 2020 (QTD)
RESULTS OF OPERATIONS IN 2021 COMPARED TO 2020
Three Months EndedSeptember 30, 2021 Compared with Three Months EndedSeptember 30, 2020 Three Months Ended Revenue: September 30 Favorable Percentage Millions of dollars 2021 2020 (Unfavorable) Change Completion and Production$ 2,136 $ 1,574 $ 562 36 % Drilling and Evaluation 1,724 1,401 323 23 Total revenue$ 3,860 $ 2,975 $ 885 30 % By geographic region: North America$ 1,615 $ 984 $ 631 64 % Latin America 624 380 244 64 Europe/Africa/CIS 676 649 27 4 Middle East/Asia 945 962 (17) (2) Total revenue$ 3,860 $ 2,975 $ 885 30 % Three Months Ended Operating income: September 30 Favorable Percentage Millions of dollars 2021 2020 (Unfavorable) Change Completion and Production$ 322 $ 212 $ 110 52 % Drilling and Evaluation 186 105 81 77 Total 508 317 191 60 Corporate and other (50) (42) (8) (19) Impairments and other charges (12) (133) 121 n/m Total operating income$ 446 $ 142 $ 304 214% n/m = not meaningful Consolidated revenue was$3.9 billion in the third quarter of 2021, an increase of$885 million , or 30%, as compared to the third quarter of 2020. Consolidated operating income was$446 million during the third quarter of 2021, a$304 million increase from operating income of$142 million during the third quarter of 2020. The increase in revenue was primarily driven by higher activity and pricing for pressure pumping services and increases across multiple other product service lines inNorth America land andLatin America , as well as additional artificial lift activity inNorth America land. TheMiddle East /Asia region grew drilling-related services and project management activity, theEurope /Africa /CIS region improved cementing activity, wireline activity, testing services, and well intervention, while pipeline services increased inChina andRussia . Partially offsetting these increases were lower completion tool sales in the Eastern Hemisphere, less stimulation activity in theMiddle East /Asia , and decreased completion tool sales and stimulation activity inCanada . The increase in operating income was due in part to the negative impact on third quarter 2020 operating income from$133 million of impairments and other charges that were included in the results of that quarter, while the third quarter of 2021 benefited from higher commodity prices driving increased activity, higher utilization, and improved operating leverage from the structural cost reductions we implemented during 2020. Revenue fromNorth America was 42% of consolidated revenue in the third quarter of 2021 compared to 33% of consolidated revenue in the third quarter of 2020. Operating Segments Completion and Production Completion and Production revenue in the third quarter of 2021 was$2.1 billion , an increase of$562 million , or 36%, when compared to the third quarter of 2020, while operating income was$322 million , an increase of$110 million , or 52%. These results were primarily due to an increase in pressure pumping services and artificial lift activity inNorth America land, as well as multiple product service lines inLatin America , and additional completion tool sales in the Western Hemisphere. In addition, well intervention services increased globally, pipeline services improved inChina andRussia , and pressure pumping HAL Q3 2021 FORM 10-Q | 20 -------------------------------------------------------------------------------- Part I. Item 2 | Results of
Operations in 2021 Compared to
Table of Contents 2020 (QTD)
services increased in
Drilling and Evaluation Drilling and Evaluation revenue in the third quarter of 2021 was$1.7 billion , an increase of$323 million , or 23% when compared to the third quarter of 2020, while operating income was$186 million , an increase of$81 million , or 77%. These results were primarily driven by increases in drilling-related services, wireline activity, project management activity, and testing services in the Western Hemisphere, higher drilling-related services across theMiddle East /Asia region, theUnited Kingdom , andNigeria , along with higher fluid services inRussia . Also, project management activity rose in theMiddle East , and testing services and wireline activity increased inEurope /Africa /CIS. Partially offsetting the increases were decreases in drilling-related services inNorway ,Saudi Arabia , andAsia , lower project management activity inIndia , lower wireline activity inSaudi Arabia , theUnited Kingdom , andAustralia , and less drilling activity in theUnited Arab Emirates .
Geographic Regions
North America North America revenue in the third quarter of 2021 was$1.6 billion , a 64% increase compared to the third quarter of 2020. This increase was primarily due to increased activity across multiple product service lines inNorth America land and theGulf of Mexico , as well as increased drilling services inCanada . Partially offsetting these increases were lower pressure pumping services and completion tool sales inCanada , and lower stimulation activity in theGulf of Mexico .Latin America Latin America revenue in the third quarter of 2021 was$624 million , a 64% increase compared to the third quarter of 2020, resulting from increased activity across multiple product service lines inArgentina ,Mexico , andBrazil , additional fluid services and completion tool sales inGuyana , higher well construction activity, well intervention services, and wireline activity inColombia , and improved project management and well construction activity inEcuador . Partially offsetting these increases were reduced completion tool sales inTrinidad .
Europe /Africa /CIS revenue in the third quarter of 2021 was$676 million , a 4% increase compared to the third quarter of 2020, resulting primarily from increased activity across multiple product service lines inWest Africa ,Angola , andMozambique , additional fluid activity and pipeline services inRussia , improved well construction activity in theUnited Kingdom , and higher well intervention services across the region. Partially offsetting these increases were lower drilling-related services inNorway , decreases in multiple product service lines inAzerbaijan , and lower completion tool sales in theUnited Kingdom ,Algeria andRussia .Middle East /Asia Middle East /Asia revenue in the third quarter of 2021 was$945 million , a 2% decrease compared to the third quarter of 2020, largely resulting from a decline in completion tool sales across the region, lower activity across multiple product service lines in theUnited Arab Emirates ,India ,Saudi Arabia ,Kuwait , andIndonesia , and declines in stimulation and wireline activity inAustralia . Partially offsetting these declines were higher project management activity inOman ,Saudi Arabia , andIraq , increased well construction activity inAustralia , additional fluids activity in theMiddle East , and improved pipeline services inChina . Other Operating Items Impairments and other charges. During the three months endedSeptember 30, 2021 , we recognized$12 million of special charges. This includes$36 million of depreciation catch-up expense related to assets previously classified as held for sale related to our Pipeline and Process Services business,$15 million of severance costs, and$35 million of other items, partially offset by a$74 million gain related to the closing of the structured transaction for ourNorth America real estate assets. During the three months endedSeptember 30, 2020 , we recognized$133 million of severance costs and other charges to further adjust our cost structure to market conditions. See Note 2 to the condensed consolidated financial statements for further discussion on the third quarter of 2021 charges. HAL Q3 2021 FORM 10-Q | 21
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Part I. Item 2 | Results of Operations in 2021 Compared to
Table of Contents 2020 (QTD) Nonoperating Items Effective tax rate. During the three months endedSeptember 30, 2021 , we recorded a total income tax provision of$76 million on a pre-tax income of$316 million , resulting in an effective tax rate of 24% for the quarter. During the three months endedSeptember 30, 2020 , we recorded a total income tax provision of$18 million on a pre-tax loss of$1 million , resulting in an unusually high negative effective tax rate for the quarter. HAL Q3 2021 FORM 10-Q | 22 -------------------------------------------------------------------------------- Part I. Item 2 | Results of
Operations in 2021 Compared to
Table of Contents 2020 (YTD) Nine Months EndedSeptember 30, 2021 Compared with Nine Months EndedSeptember 30, 2020 Nine Months Ended Revenue: September 30 Favorable Percentage Millions of dollars 2021 2020 (Unfavorable) Change Completion and Production$ 6,054 $ 6,029 $ 25 - % Drilling and Evaluation 4,964 5,179 (215) (4) Total revenue$ 11,018 $ 11,208 $ (190) (2) % By geographic region: North America$ 4,588 $ 4,493 $ 95 2 % Latin America 1,693 1,242 451 36 Europe/Africa/CIS 1,989 2,171 (182) (8) Middle East/Asia 2,748 3,302 (554) (17) Total revenue$ 11,018 $ 11,208 $ (190) (2) % Nine Months Ended Operating income (loss): September 30 Favorable Percentage Millions of dollars 2021 2020 (Unfavorable) Change Completion and Production$ 891 $ 713 $ 178 25 % Drilling and Evaluation 532 452 80 18 Total 1,423 1,165 258 22 Corporate and other (161) (152) (9) (6) Impairments and other charges (12) (3,353) 3,341 n/m Total operating income (loss)$ 1,250 $ (2,340) $ 3,590 153 % n/m = not meaningful Consolidated revenue was$11.0 billion in the first nine months of 2021, a decrease of$190 million , or 2%, as compared to the first nine months of 2020. We reported operating income of$1.3 billion in the first nine months of 2021 compared to an operating loss of$2.3 billion during the first nine months of 2020. The decrease in revenue was primarily driven by lower activity associated with completion tool sales globally, except inLatin America , drilling-related services, project management activity, wireline activity, and testing services in the Eastern Hemisphere, and pressure pumping services inMiddle East /Asia . Partially offsetting the decreases were increases in stimulation and artificial lift activity in the Western Hemisphere, improved activity across multiple product service lines inLatin America , and higher pipeline services inAsia and theUnited Kingdom . Operating results in the first nine months of 2020 included$3.4 billion of impairments and other charges while the first nine months of 2021 benefited from higher commodity pricing driving increased activity, higher utilization, and operating leverage from 2020 structural cost reductions. Revenue fromNorth America was 42% of consolidated revenue in the first nine months of 2021, compared to 40% of consolidated revenue in the first nine months of 2020. Operating Segments Completion and Production Completion and Production revenue in the first nine months of 2021 was$6.1 billion , an increase of$25 million compared to the first nine months of 2020. This increase was primarily driven by a rise in stimulation and artificial lift activity in the Western Hemisphere, higher pipeline services inChina and theUnited Kingdom , and well intervention services inLatin America . Partially offsetting these increases were decreased pressure pumping services inMiddle East /Asia and lower completion tool sales globally. Operating income in the first nine months of 2021 was$891 million , an increase of$178 million , or 25%, compared to the first nine months of 2020, mainly driven by higher utilization for pressure pumping inNorth America land andLatin America , increased well intervention services inLatin America andMiddle East /Asia , and improved artificial lift activity inNorth America land. Partially offsetting these increases to operating income were lower completion tool sales in the Eastern Hemisphere, theGulf of Mexico , andCanada . HAL Q3 2021 FORM 10-Q | 23 -------------------------------------------------------------------------------- Part I. Item 2 | Results of
Operations in 2021 Compared to
Table of Contents 2020 (YTD) Drilling and Evaluation Drilling and Evaluation revenue in the first nine months of 2021 was$5.0 billion , a decrease of$215 million , or 4%, compared to the first nine months of 2020, primarily related to reduced drilling-related services in the Eastern Hemisphere, wireline activity in the Eastern Hemisphere andNorth America land, and decreased project management activity inIraq ,India , andEurope /Africa /CIS. Also, testing services were reduced inSaudi Arabia and software sales declined globally. Partially offsetting these decreases were increased fluid services inNorth America land andLatin America , improved drilling services inCanada andBrazil , and increased wireline activity inArgentina . Operating income in the first nine months of 2021 was$532 million , an increase of$80 million , or 18%, compared to the first nine months of 2020 based in part on improved margins related to project management activity inIndia andSaudi Arabia , as well as higher drilling-related services in the Western Hemisphere and wireline activity inLatin America . Offsetting these operating income improvements was a global reduction of software sales. Geographic RegionsNorth America North America revenue in the first nine months of 2021 was$4.6 billion , a 2% increase compared to the first nine months of 2020, driven by higher activity and pricing across the region, primarily associated with stimulation activity and drilling-related services. Artificial lift activity improved inNorth America land and project management activity increased in theGulf of Mexico . These increases were partially offset by lower completion tool sales across the region, along with reduced cementing and wireline activity.Latin America Latin America revenue in the first nine months of 2021 was$1.7 billion , a 36% increase compared to the first nine months of 2020, resulting primarily from an increase across multiple product service lines inArgentina , increased fluid services inBrazil and theCaribbean , along with improved stimulation activity, completion tool sales, testing services, and project management activity inMexico , additional drilling services inBrazil , and increased well intervention services inBrazil andColombia . Partially offsetting these increases were lower completion tool sales in theCaribbean and lower software sales inBrazil .
Europe /Africa /CIS revenue in the first nine months of 2021 was$2.0 billion , an 8% decrease from the first nine months of 2020, driven by a decrease across multiple product service lines inRussia , theNorth Sea ,Azerbaijan , andNigeria . These declines were partially offset by an increase in completion tool sales inNorway and increased pipeline services in the theUnited Kingdom andRussia , testing services inAlgeria , and a slight improvement in stimulation activity across the region.Middle East /Asia Middle East /Asia revenue in the first nine months of 2021 was$2.7 billion , a 17% decrease from the first nine months of 2020, resulting primarily from reduced activity across multiple product service lines inSaudi Arabia andUnited Arab Emirates , lower pressure pumping services, drilling-related services, and completion tool sales across the region, reduced project management activity inIraq andIndia , and decreases in wireline activity inMalaysia . Partially offsetting these decreases were improved pipeline services inChina and drilling services inAustralia .
Other Operating Items
Impairments and other charges. During the nine months endedSeptember 30, 2021 , we recognized$12 million of special items. This includes$36 million of depreciation catch-up expense related to assets previously classified as held for sale related to our Pipeline and Process Services business,$15 million of severance costs, and$35 million of other items, partially offset by a$74 million gain related to the closing of the structured transaction for ourNorth America real estate assets. This compares to$3.4 billion of impairments and other charges in the nine months endedSeptember 30, 2020 to further adjust our cost structure to market conditions. These charges consisted primarily of asset impairments, mostly associated with pressure pumping equipment and real estate facilities, as well as inventory write-offs, severance costs, and other charges. See Note 2 to the condensed consolidated financial statements for further discussion on the third quarter of 2021 charges. HAL Q3 2021 FORM 10-Q | 24 -------------------------------------------------------------------------------- Part I. Item 2 | Results of
Operations in 2021 Compared to
Table of Contents 2020 (YTD) Nonoperating Items Effective tax rate. During the nine months endedSeptember 30, 2021 , we recorded a total income tax provision of$193 million on a pre-tax income of$834 million , resulting in an effective tax rate of 23.2%. During the nine months endedSeptember 30, 2020 , we recorded a total income tax benefit of$265 million on pre-tax loss of$3.0 billion , resulting in an effective tax rate of 8.9%. The unusual rate for the nine months endedSeptember 30, 2020 was largely the result of recording a valuation allowance against certain deferred tax assets in the first quarter of 2020, primarily due to the unprecedented disruption in the oil and gas industry. HAL Q3 2021 FORM 10-Q | 25 --------------------------------------------------------------------------------
Table of Contents Part I. Item 2 | Forward-Looking Information FORWARD-LOOKING INFORMATION The Private Securities Litigation Reform Act of 1995 provides safe harbor provisions for forward-looking information. Forward-looking information is based on projections and estimates, not historical information. Some statements in this Form 10-Q are forward-looking and use words like "may," "may not," "believe," "do not believe," "plan," "estimate," "intend," "expect," "do not expect," "anticipate," "do not anticipate," "should," "likely," and other expressions. We may also provide oral or written forward-looking information in other materials we release to the public. Forward-looking information involves risk and uncertainties and reflects our best judgment based on current information. Our results of operations can be affected by inaccurate assumptions we make or by known or unknown risks and uncertainties. In addition, other factors may affect the accuracy of our forward-looking information. As a result, no forward-looking information can be guaranteed. Actual events and the results of our operations may vary materially. We do not assume any responsibility to publicly update any of our forward-looking statements regardless of whether factors change as a result of new information, future events or for any other reason. You should review any additional disclosures we make in our press releases and Forms 10-K, 10-Q and 8-K filed with or furnished to theSEC . We also suggest that you listen to our quarterly earnings release conference calls with financial analysts.
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